economic crises

Capitalism has had recurring crises of various intensity throughout its history. Crisis is built into its very fabric. However, there are a number of different explanations for its crises. They can be roughly divided into theories based upon difficulties producing surplus value & theories based upon difficulties realising surplus value.

‘Profit-squeeze’ is a theory that highlights the problem of a falling rate of profit due to increases in wages as labour becomes more scarce in boom times. A central part of Marx’s book Capital is ‘The Law of the Tendential Fall in the Rate of Profit’, which shows how capital accumulation in itself can put downward pressure on the rate of profit over time.

Underconsumptionists argue that workers getting paid less than the value of what they produce means that there is often a realisation problem: there’s not enough effective monetary demand to purchase the commodities produced & so realise a profit for the capitalists. A variation of this emphasizes the overproduction of commodities relative to the money commodity as a result of credit money.

It may be that there is a realisation problem that operates at the cyclical level, causing periodic overproduction, alongside a longer term downward trend in the rate of profit as explained in Volume III of Capital.